Latest / Bitcoin for Financial Services Podcast / The Fund That Pairs Real Estate With Bitcoin and Keeps Your Downside Covered

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The Fund That Pairs Real Estate With Bitcoin and Keeps Your Downside Covered · Bitcoin for Financial Services Podcast

• 0:00
  So what's so good about having this super secure real estate to back up your Bitcoin position?
• 0:09
  Imagine, so of all, for example, high net worth, family office type investors, how many of them
• 0:18
  want to come into Bitcoin or maybe want to come in more significantly to Bitcoin,
• 0:24
  but there's a mandate, there's a personal risk preference,
• 0:28
  there's a timing issue where they care about the return of their capital
• 0:33
  more than they care about the return on their capital.
• 0:36
  So they don't need the full upside as long as they know they're going to get it back
• 0:40
  if things go badly, if they're wrong, if I'm wrong,
• 0:45
  if you're wrong and Bitcoin goes down over the next three years,
• 0:49
  goes to zero even, BitHedge is the product for them.
• 0:54
  because if Bitcoin doesn't give you your money back plus a return
• 0:59
  we're going to go get it from the real estate
• 1:02
  Bitcoin is a currency on the internet
• 1:05
  if you don't trust any other currency this is where you go
• 1:08
  it's going to outperform everything
• 1:09
  Bitcoin can eventually be worthless
• 1:11
  every day is a good day to buy Bitcoin
• 1:13
  Bitcoin reached its highest price to date
• 1:15
  Bitcoin hitting a new high
• 1:17
  it really has reached escape velocity
• 1:19
  there is no second best
• 1:20
  who cares about Bitcoin
• 1:21
  it's the only secure database that's ever been invented
• 1:24
  Antisocial.
• 1:25
  Bitcoin is the real deal.
• 1:27
  Stupid.
• 1:27
  Everything is bullish for Bitcoin.
• 1:30
  Immoral.
• 1:30
  It's going up forever, Laura.
• 1:32
  Fix the money.
• 1:34
  Fix the world.
• 1:54
  specific situation or objectives is not intended as a recommendation appropriate for any individual.
• 1:56
  Listeners are encouraged to seek advice from a qualified tax legal or investment advisor to
• 1:59
  determine whether any information presented may be suitable for their specific situation.
• 2:01
  Past performance is not indicative of future performance. Any statements or opinions are
• 2:03
  subject to change without notice. Welcome to Bitcoin for Financial Services Media,
• 2:11
  the podcast where sound money meets professional services. We explore how to build a financial
• 2:16
  services industry within the principles, values, and ethos of Bitcoin. A big part of that is their
• 2:21
  flagship event coming up in Denver from October 20th through 22nd. Legacy Finance is being rebuilt
• 2:27
  in real time and Bitcoin is at the center of it. The Bitcoin Financial Services Summit brings
• 2:32
  together the people actually building the infrastructure. RIAs, lenders, CPAs, miners,
• 2:38
  treasury companies, and Bitcoin native operators all in one room. If you understand where Bitcoin
• 2:43
  Finance is going next, get your tickets now at bffs.media.com. Look forward to seeing you there.
• 2:50
  Today, we're joined by a special guest, Daniel Holbrook, Managing Director at BitHedge.
• 2:57
  Let's get started.
• 3:04
  Welcome back to Bitcoin for Financial Services Media.
• 3:08
  We're joined by an amazing guest, Daniel Holbrook, Managing Partner at BitHedge, friend of the pod,
• 3:15
  speaker at Bitcoin Financial Services Summit 2026. Daniel, how are you doing?
• 3:22
  Hey, I'm doing great. Thanks for having me on.
• 3:25
  It's our pleasure. It's been a ton of fun for Jordan and I to touch base with the speakers
• 3:32
  prior to the summit. I think we'll have an awesome content library. Folks attending can
• 3:36
  really kind of start to get to know you guys and everything. So why don't we start there?
• 3:40
  Why don't you tell the audience about who Daniel is, what you're working on, how you got into
• 3:45
  Bitcoin, how you got here. Okay. Yeah. I was a commercial real estate entrepreneur for 15 years.
• 3:52
  I started getting into real estate in college during and right after the global financial
• 3:58
  crisis. So the timing was right. I found it the most fascinating asset between it functions with
• 4:06
  store of value. And I didn't know it at the time, but it's basically a debasement asset too,
• 4:13
  or has served that purpose.
• 4:15
  And I did evaluation.
• 4:17
  I had evaluation practice.
• 4:20
  Loved doing investments.
• 4:23
  That's what really drew me into real estate was investing
• 4:25
  and did ground up development, syndications.
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  Touched a lot of parts of the real estate world.
• 4:32
  And this is a long intro,
• 4:33
  but it took me a long time to really find Bitcoin.
• 4:38
  But once I did,
• 4:39
  I realized it had some of the best parts of real estate as an investment, but was much better and scarcer and better set up for a digital financial system.
• 4:53
  So full turn of focus two years ago into Bitcoin.
• 4:57
  And now I'm creating a fund, launching a fund that's been created that pairs the two assets together.
• 5:07
  I love it I mean I feel like this is such a growing trend in the Bitcoin space I mean we just talked to Chris and I think he a mutual friend of all of ours
• 5:18
  But I just love to see the two hard assets, you know, getting married.
• 5:24
  And it's just from my vantage point, it's just interesting to see how people are being creative with the two.
• 5:31
  So I'm very much looking forward to this conversation, I guess.
• 5:34
  So you got into Bitcoin in like what year exactly?
• 5:39
  Yeah, early 2025 is when.
• 5:42
  So I bought Bitcoin in 2020, like a lot of people.
• 5:47
  And I was buying cryptos, right?
• 5:49
  Bitcoin seems expensive.
• 5:51
  So buy a little of that and a little of this and a little of that.
• 5:54
  And after a couple of years, when I checked back on my wallet, I'm like, oh, most of these are down 90%.
• 6:00
  What the hell are they?
• 6:02
  And just sell them.
• 6:03
  I didn't get it. And that's where in early 2025 is when I like re-examined what it actually started
• 6:15
  with blockchain, which I know a lot of Bitcoiners are like, keep your blockchain out of it if you're
• 6:20
  into blockchain tokenization, any of that. But that's where it started for me when it started
• 6:27
  to dawn. It's how is blockchain going to change commercial real estate, for example, lending,
• 6:32
  title escrow so many functions will be better done with a blockchain than they are in the
• 6:39
  traditional system and from that realization to orange pill doll in in bitcoin was just a few
• 6:48
  weeks of education for me where it felt like whatever tokenization on-chain activities are
• 6:55
  going to go. Bitcoin's the end game, at least for the financial monetary blockchain.
• 7:03
  So then it was full focus on Bitcoin. Yeah. What was your education like in those few weeks? I'm
• 7:12
  curious what resources that you would point other advisors? Because of course, we'd be remiss if we
• 7:18
  didn't mention there's this whole cold card debacle that's unfolded over the course of the
• 7:24
  last, I guess, five or six days now. And I'm just curious, kind of what different rabbit holes did
• 7:33
  you go down? Who were you listening to in order to kind of wrap your arms around Bitcoin, the asset,
• 7:41
  Bitcoin, the network? Great question. Even back then, AI was a big part of it. ChatGPT is what I
• 7:50
  using back then just to like figure out what's the difference between you know this blockchain
• 7:56
  that blockchain what's going to happen with tokenization back then it was really popular
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  people were like digitizing real estate and selling like nfts of different cities where they kind of
• 8:06
  created a digital block chain layer either in l1 or l2 so i learned all about l1s and l2s
• 8:12
  and that you know for the most part unless you're going to be working in
• 8:20
  we'll just call it crypto you know blockchain web3 unless you're going to be working in it
• 8:26
  you don't need to understand all that stuff but to understand where it's heading like many people
• 8:32
  the bitcoin standard was really important
• 8:37
  I think understanding the debasement trade helps a lot of us in the industry and the kind of people
• 8:44
  who will be listening to this podcast understand like why Bitcoin because if you don't understand
• 8:51
  why we need a better monetary asset you're not as compelled to seek it out and find it and
• 9:00
  understand it you know the work just seems like I could get to it someday but understand the
• 9:05
  debasement trade. I know Luke Groman is one that talks a lot about that when Alden
• 9:09
  listened to her podcasts or books was something that helped me see
• 9:14
  this is coming like it or not. I'd rather get in front of it than be behind it.
• 9:21
  Totally. So yeah, I mean, nothing stops this, this train. I think it's awesome. And, you know,
• 9:26
  just a good proof point too, because it shouldn't necessarily take anybody, you know, a lot of time,
• 9:32
  But if you put some real honest effort behind it, you'll quickly learn and discover Bitcoin is the end game.
• 9:37
  So I think that's awesome.
• 9:40
  And, you know, I don't like being sympathetic to the shitcoin bros.
• 9:44
  But if I have to be, if I'm forced to, sure, maybe some interesting technology projects.
• 9:49
  Don't add this economic layer to it.
• 9:52
  Don't like pre-mine and rug pull me.
• 9:56
  So I just don't think any of those folks are ethical actors, which inherently brings it back to Bitcoin to begin with.
• 10:05
  So I think that's awesome.
• 10:06
  What I haven't seen before and tip of the cap to you is someone you learn about Bitcoin so recently and then start building products and company around it.
• 10:16
  So was it just the overlap you saw with real estate and something you know you been doing you know professionally for for a long time where the idea clicked or were you just overcome with such conviction in the Bitcoin asset class where
• 10:31
  you knew you had to start working in the industry?
• 10:35
  I think I started somewhere that was accessible, both to me and to the market I'm going after.
• 10:43
  And that is, it's a structured product.
• 10:47
  So it's a financial product.
• 10:48
  it's a private fund but whereas a lot of funds are trying to have better algorithms or
• 10:57
  you know these nuances or a lot of them are building some kind of product around it mine's
• 11:06
  really just creating a structure that solves a problem for two other parties they both get a
• 11:12
  better exposure profile than their current options. And it's simple to understand. Give it 15 minutes
• 11:20
  and it's simple to understand. And yeah, how did I get here kind of fast? I think it does lean on
• 11:30
  my entrepreneurial real estate background where I did some creative deal structuring, seller financing,
• 11:37
  different partnership and JV arrangements where it kind of clicked. And I guess here's the
• 11:46
  motivation. I see this Bitcoin's adoption curve, you know, we're on the very bottom of the S curve.
• 11:53
  It's seemingly just turning to the fast phase of adoption. And yet we're in a bear market where
• 12:02
  Bitcoin is half off compared to last year. And none of the macro factors changed. In fact,
• 12:09
  they've all improved compared to 2025. So it's almost like I can't not try and get this,
• 12:20
  do as much as I can to help get Bitcoin in as many people's hands as possible during this phase.
• 12:27
  it's such an asymmetric time. Bitcoin's on sale. There's this giant push of momentum behind it.
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  And there are certain parties who I would consider marginal. If they wanted to buy Bitcoin,
• 12:43
  they would have gone and bought Bitcoin. If they wanted to sell their real estate,
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  they would have already sold their real estate. But it's these marginal people who just want a
• 12:50
  little bit better option. And that can be addressed with better onboarding tools,
• 12:56
  better financial structures, simpler setup to the point about cold card queue.
• 13:02
  Like some people are probably like, I don't want to figure out how to do the dice rolls and all that.
• 13:07
  So if you can make it easier for them to onboard them, but we have to do it in an institutionally credible way.
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  Something they can diligence and verify, especially if like my fund, it's targeting the larger allocations.
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  It's targeting people who want to take a sizable Bitcoin position.
• 13:26
  Yeah. Well, and I love your story about, you know, I think your story of getting kind of into crypto, going down that rabbit hole and coming back full circle. I think that that is whether Bitcoiners like to hear this, like Wyatt, right? Or really anybody, right? Like that is just a very common story.
• 13:46
  so i love to i just love to hear that and wanted to highlight that if that you know if you're
• 13:52
  listening to this and you're like i went down all these different rabbit holes i did yield farming
• 13:57
  or whatever but i want to come back you're welcome back you know a lot of big owners i think are
• 14:03
  a little too harsh so i love i love to hear that you've ever bought an nft you're out
• 14:10
  yeah yeah yeah if you bought a house in the metaverse no no
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  i've actually never bought an mft have you guys bought an ft oh yeah i bought it really i had i
• 14:23
  had friends and clients that made a lot of money doing the nft craze back in like 2021 now of
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  course it's died it's died like there's no way around it uh at least from what i've seen in those
• 14:38
  projects but um yeah for a little bit they were just generating these images and people were going
• 14:44
  crazy and and then they would attach things with them like i had one buddy who who did one you got
• 14:50
  like a a really rare bottle of bourbon with your nft um so anyways it was it was an interesting
• 14:58
  time and bitcoin had its run up in 21 as well but i just i wanted to highlight that that um
• 15:05
  yeah there's always the way the way back like the prodigal son right you see you see the shit
• 15:10
  Exactly.
• 15:40
  while building for the long term To learn more or book a consultation visit satoshipacioli
• 15:48
  I'm curious to hear your overall take of just like where the commercial and residential real
• 15:55
  estate market is today. You know, like there's all the private equity stuff. Maybe we go down
• 16:01
  that rabbit hole just a little bit to bring everyone up to speed on just where where is the
• 16:06
  real estate market in you know August of 2026 yeah and and just to add on to that Daniel I I want to
• 16:15
  know that too because from my seat like sympathetic to real estate bros not really into real estate
• 16:21
  myself but I have no idea if it's good or bad like I can't tell yeah I'll say it probably depends
• 16:30
  on your market. So different answer for different markets, but in general, speaking as someone who
• 16:39
  owns real estate, still operate a little bit, but I'll get into that. Why I'm not as much a real
• 16:45
  estate investor and operator as I used to be. It's felt like four years of flat, you know,
• 16:54
  some markets down quite a bit. Some are still doing fine, but four years of wow.
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  What would be those fine markets?
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  Certain. Actually, it's interesting when you talk to people in the real estate world,
• 17:11
  a lot of them feel like their market is doing fine and stable. But I mean, anywhere related
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  to data centers is doing really well. Some growth markets, you know, states that are still
• 17:31
  attracting in-migration. But I will say I don't pay nearly as much attention to real estate as
• 17:38
  an asset class as I did for the 15 years prior because I'm much more focused on the fund and
• 17:45
  what's relevant to the fund, which I will say real estate is the collateral for the fund. So
• 17:51
  how do I solve the problem of not knowing the exact market and property? We just take
• 17:58
  extremely conservative first position real estate equity as collateral, like below 50% LTV,
• 18:07
  far below where most banks are lending. And I can get into that later. But
• 18:13
  to get back to your bigger question, what is it like to be a real estate owner,
• 18:19
  especially say sophisticated larger portfolio commercial real estate mostly in 2026
• 18:26
  for most people it's not been very exciting it's expenses are constantly rising no reason to expect
• 18:37
  them to go down anytime soon we're on the 79th final deal with iran like open the straighter
• 18:45
  else. It's going to happen this time. Yeah, no, 79th time is the charm, I'm sure.
• 18:53
  So, you know, inflation's coming, supply shocks to whatever degree are coming,
• 19:00
  and we already know the government's playbook. Whichever way it goes, it's going to be print
• 19:04
  more money. And that eventually could flow through to the rent side of real estate. But with,
• 19:13
  I think AI is an interesting thing to be hitting during Bitcoin's adoption curve and robotics as well, because we could have a pretty drastic rearranging of the needs of real estate owners, what kind of uses go on in buildings, what's now outsourced to the cloud, what's now outsourced to AI, what's now outsourced to robots.
• 19:37
  So even if you've had an asset that's been performing well for 20 years, it might be susceptible to one of those changes.
• 19:47
  And why everyone's kind of holding their breath is interest rates.
• 19:51
  People were telling me, you know, buy in 2023, you know, just hold on, plug your nose, hold that air and get through to 2024 because they're going to cut rates.
• 20:03
  And then it was 2025 and now it's 2026.
• 20:05
  And there's still not a clear indication they're going to cut rates.
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  And real estate is just so sensitive to that.
• 20:12
  You cut rates, cap rates come down, you can sell.
• 20:17
  Cash flows improve a lot.
• 20:20
  Yeah.
• 20:21
  And like last week, right, they left rates where they were at, right?
• 20:25
  And if you want to pull out your crystal ball real quick,
• 20:28
  do you think we see any rate cuts or even rate hikes
• 20:33
  from now to the end of this year?
• 20:36
  Or is it too hard to say?
• 20:40
  Too hard to say for me.
• 20:42
  Yeah.
• 20:43
  I'd say it flips from almost certainly they're cutting
• 20:46
  to no, it's probably flat.
• 20:48
  Actually, they might rise.
• 20:50
  knows um yeah well it's really interesting i just had to look up the the guy's name because when you
• 20:57
  look at like the two conflicts like the u.s is involved with the war in ukraine and the war in
• 21:01
  oran like i mean the story here is energy and i tell you know people all the time like i'm a
• 21:07
  enjoyer of macroeconomics but we have to be like a little careful just because i mean these are very
• 21:12
  complex systems with a lot of variables and it's easy to cherry pick data points and draw your own
• 21:16
  conclusions and you're missing, you know, three quarters of the story. But we also know money and
• 21:23
  energy on the underlying base markets, like every other market is based on top of them. So like,
• 21:30
  if these wars really are an energy story to your points, like how could expenses ever go down?
• 21:36
  You know, everything is going to be, you know, ripple affected from, from these conflicts. And
• 21:43
  And I always have to remind myself, I enjoy listening to guys.
• 21:45
  I had to look up his name here.
• 21:46
  His name is Ryan Peterson.
• 21:47
  He's the CEO of a logistics company called Flexport.
• 21:51
  And I spend all my time in digital land and Bitcoin and moving numbers around on a screen and justifying my fee and all that.
• 22:01
  I don't do anything in the real world.
• 22:03
  and i'm always reminded when i hear guys like that talk you know it's like okay you have tankers
• 22:09
  sitting in salt water for five months and now you gotta like get them started again and then they
• 22:17
  get to port they have to like scrub all these like muscle barnacle things off of them and it's like
• 22:24
  well how many like barnacle scrubbers do you think there are in like rotterdam it's like i don't know
• 22:29
  but they're probably all booked out for like six months to get these things
• 22:33
  clean. So it's like, when you actually like dig into like,
• 22:36
  what goes into like the real world, I think it's just so fascinating.
• 22:39
  It's like, I think we, we probably will be in for, you know,
• 22:42
  economically turbulent times to, to support your, your point,
• 22:48
  which is, you know, why I'll,
• 22:50
  I'll place this to you as somebody who's, you know,
• 22:53
  more sympathetic to real estate and Bitcoin or, you know,
• 22:56
  holding real estate than maybe Jordan and I would be. What are your conversations like with
• 23:03
  real estate operators and investors right now? Have you been able to orange pill them? Do they
• 23:09
  see the writing on the wall? Are they going down with the real estate asset class just because
• 23:13
  they've had success with that in the past? Or are they seeing what you've seen and rotating out of
• 23:19
  it? Yeah. A whole spectrum. Real estate is so massive. Estimated round numbers, $30 trillion
• 23:32
  of commercial real estate in the US. So what sliver of that is already knowledgeable about Bitcoin,
• 23:41
  bullish, understands the thesis. So that's where I quickly moved to in my process from
• 23:51
  real estate's the best thing ever. Now I understand Bitcoin. So I rotated. I sold most of my portfolio,
• 23:58
  most of my assets. And to the point I was making earlier, most of those had five-year fixed rate
• 24:04
  debt. So even if it was a 10-year loan, 20-year loan, it reset every five years. So 2025, 2026
• 24:12
  hits and I'm getting killed. Mid threes interest rates to mid sixes, upper sixes.
• 24:19
  And at the same time, the debt was increasing, insurance up. Some of these assets were in
• 24:25
  Florida. So some cases it was up like 200% from where I bought the property. Maintenance costs
• 24:34
  up rents essentially flat. So even though I could have kept the asset, that compared to the value
• 24:41
  prop at Bitcoin, it was no brainer. And here's why I'm not like a quant hedge fund trading fund.
• 24:49
  It's really a structured credit fund. I buy Bitcoin when I get liquidity. So I've been buying
• 24:55
  like most of the tops all the way through 2025 and 2026. Does that scare me? No. It's a long-term
• 25:06
  thesis, but I think the right time for a real estate owner to roll into Bitcoin, it's not so
• 25:12
  much about the Bitcoin cycle as their portfolio management, how the asset's performing, and just
• 25:19
  know that you're taking a long-term position in Bitcoin and it's if it fits your you know
• 25:27
  operational needs better than the real estate just buy the Bitcoin when you can and
• 25:33
  it's look at a chart you know we're not making forecasts here but this seems to be a good time
• 25:43
  to get into Bitcoin.
• 25:45
  If you follow the cycles
• 25:46
  and you see where the price is
• 25:48
  in late 2026,
• 25:51
  very favorable time to get in.
• 25:54
  Yeah.
• 25:55
  And maybe we go down the rabbit hole I know we talking a lot about real estate but I think it important to kind of dovetail into your product here in just a moment But maybe just talk about the jurisdictional risk right
• 26:08
  I mean, if you're a commercial real estate investor, I don't think you had to think about that near as much as you do today.
• 26:16
  And if you start thinking, okay, where do I want to hold real estate in the United States or even globally?
• 26:23
  I think that and correct me if I'm wrong, but if I'm in those shoes, it's that list is dwindling of where do I want to actually hold the real estate?
• 26:32
  And one of the beautiful things about Bitcoin is that it's a global asset and you can take it anywhere you'd like.
• 26:39
  I mean, I even think about like I was just re-listening to Peter Thiel on one of White's favorites, by the way, on Joe Rogan.
• 26:47
  And, you know, one of the richest guys. Right. And Joe's like, where do you want to live?
• 26:52
  And he's like, I don't know. I need to get out of LA, but it's difficult. I've got to, I'd have to
• 26:57
  move my, my entire corporate office and move all of my employees somewhere else. So there's a huge
• 27:03
  cost there. And then I think he just, I can't remember where in South, South America, but,
• 27:08
  you know, he just set up camp somewhere down there. He was Buenos Aires. Okay. Somewhere in
• 27:13
  Brazil. Yeah. So that's Argentina brother. What did I say? My bad. Okay. We'll cut that. I'm
• 27:19
  getting. But it's just interesting when you start to see people of that level of wealth,
• 27:27
  where you would think, oh, it's easy for them to kind of pick up and leave. And it's really not,
• 27:32
  especially when you're tied to the real estate question. And even for my family, we just moved,
• 27:38
  you know, from Kentucky down to Florida. And there's, you know, political reasons for that
• 27:42
  schooling, safety, all those things. And when you start to think about that at a scale of like,
• 27:49
  really high net worth investors, it's just interesting to me. I'd just be curious
• 27:54
  if you could touch on the jurisdictional risk overall of real estate and how Bitcoin is
• 27:59
  differentiated from that. Especially the second part, how Bitcoin's differentiated
• 28:05
  compared to real estate, something that stores your value equally well and can travel with you
• 28:16
  anywhere is an amazing value proposition that I think once real estate owners, if they start to
• 28:23
  understand that, kind of see the light of the new store of value, that's one of the things,
• 28:33
  if you're comparing head to head, like Bitcoin versus gold, Bitcoin versus real estate,
• 28:37
  Bitcoin versus whatever else, especially versus real estate, Bitcoin wins in such a significant
• 28:45
  way that I think a lot of real estate owners should consider the benefit that maybe they
• 28:49
  haven't considered if they're only on the fence about Bitcoin.
• 28:56
  Yeah, I've never invested outside the US, so I can't.
• 29:03
  I've studied some of it, but I don't have a strong opinion there.
• 29:08
  within the U.S., there is huge variation.
• 29:13
  And I'll say even for my fund, for example,
• 29:16
  we chose to only work in half of the states.
• 29:19
  We'll only accept real estate pledges from half of the states
• 29:23
  because they have a different enforcement process.
• 29:26
  It's called the deed of trust states
• 29:28
  versus judicial foreclosure process or mortgage states.
• 29:34
  And then one, you have to take the landowner
• 29:36
  or the property owner to court and sue them to enforce your right to claim the property.
• 29:42
  And another, it's more of a process by a trustee.
• 29:49
  And depending which side of that you're on, you might like one or the other.
• 29:52
  But it's extremely complex, whereas buying Bitcoin and knowing that you own it is fully in your control.
• 30:04
  It's easy to mess up.
• 30:06
  And that's where I think for many investors, probably the bridge solution isn't to set up your own hardware wallet and try and get it right.
• 30:17
  You know, out the gate, try one.
• 30:19
  That's a pretty big hurdle to jump over.
• 30:23
  But there's some great companies and institutions helping people like both sovereign and secure custody, but also accessible and within their reach.
• 30:33
  And for example, that's what my fund uses.
• 30:35
  I would not custody the assets of the fund.
• 30:39
  You know, the limited partners entrusting me to only do one thing,
• 30:43
  which is make sure that their Bitcoin is secured by real estate.
• 30:46
  And we're going to be able to enforce that based on the outcome of Bitcoin.
• 30:52
  I don't need to be the one trusted to like manage keys and approval processes and all that.
• 30:59
  So we've hired a custodian to do that with multi-institution custody.
• 31:05
  which I guess as a side note, that's probably a big blocker.
• 31:09
  I remember that being a blocker in 2020 when I was learning about Bitcoin and kind of interested it was like okay what a wallet How do I get one What the right one
• 31:21
  And how do I make sure I don't mess it up?
• 31:24
  So I dabbled in it just enough to be able to buy some different stuff, but wasn't going to take the much bigger step to self-custody and security and really understanding it just because what was going on in my life then.
• 31:40
  and where my focus was.
• 31:43
  So even some of the advisors,
• 31:45
  anyone advising people coming into Bitcoin,
• 31:48
  find the best service providers
• 31:50
  like the people who will be at the summit
• 31:52
  and let them teach you how to help a family,
• 31:59
  high net worth individual,
• 32:01
  you know, a corporation start to accumulate Bitcoin
• 32:05
  by using the right partners
• 32:08
  instead of having to figure out so much themselves.
• 32:14
  If you're a financial professional working with Bitcoin,
• 32:17
  you know the pain of messy CSVs, broken cost basis,
• 32:21
  and accounting tools that were never built for this asset.
• 32:24
  Bitment fixes that.
• 32:26
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• 32:28
  built for CPAs, bookkeepers, advisors, miners,
• 32:32
  and serious Bitcoin investors.
• 32:34
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• 32:36
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• 32:41
  No crypto talk, no workarounds, just proper accounting for the hardest money on earth.
• 32:46
  Create a free account or book a demo at bitment.co today.
• 32:52
  Totally. Totally. You need help. It's elaborate. It's a lot. There's no redos. There's no Bitcoin
• 32:58
  helpline. So it's, it's important. Yeah. You know,
• 33:04
  trustworthy representatives that have your best interest in, in mind,
• 33:08
  but now that we've sufficiently teased out of the fund and kind of what goes
• 33:13
  into it, why don't you give us like, you know, a tactical overview.
• 33:17
  What is BitHedge? How does it work?
• 33:20
  Okay. So it's a fund,
• 33:24
  it's private investment fund three year lockup,
• 33:26
  And it is a three-party fund, which is kind of unique.
• 33:30
  Most funds are two parties.
• 33:31
  There's a GP.
• 33:32
  The LPs give them money almost all the time.
• 33:35
  It's money.
• 33:36
  BitHedge is similar.
• 33:38
  There's a general partner who's going to run the fund.
• 33:41
  There is a capital investor class that's called Class A.
• 33:45
  And then there's Class B, which is real estate owners.
• 33:49
  So as a three-party fund, each party contributes something that the other two parties need.
• 33:56
  And what unites all the parties is that we want to make money when Bitcoin goes up.
• 34:04
  So that's the first criteria you are.
• 34:07
  Easy enough.
• 34:09
  Yep.
• 34:09
  When Bitcoin goes up, we're going to make money.
• 34:12
  So what do we each contribute?
• 34:14
  The Class A partners, like I said, they bring capital.
• 34:17
  They're going to buy the Bitcoin.
• 34:18
  Or if they already have Bitcoin, they'll contribute Bitcoin to the fund.
• 34:23
  And we're raising $20 million.
• 34:25
  So that's $300 and change Bitcoin.
• 34:31
  What's unique about BitHedge's value proposition is we're actually not trying to outperform Bitcoin for our investors.
• 34:41
  We're underperforming Bitcoin in exchange for downside protection.
• 34:45
  And this is a new kind of downside protection.
• 34:49
  it's using first position which means it's property with no other debt no one else can
• 34:56
  take the property before us if things were to go badly so we're using first position
• 35:02
  liens on commercial real estate and as i mentioned earlier they're extremely conservatively under
• 35:08
  in we're targeting below 50 or targeting 25 ltv maximum 50 ltv if it's an asset we like
• 35:17
  So these are the kinds of pledges that will survive even the global financial crisis or even 2022 when property values fell pretty significantly in some markets.
• 35:32
  This would survive most instances like that.
• 35:37
  So what's so good about having this super secure real estate to back up your Bitcoin position?
• 35:43
  imagine imagine so of all for example high net worth family office type it investors how many of
• 35:56
  them want to come into bitcoin or maybe want to come in more significantly to bitcoin but there's
• 36:03
  a mandate there's a personal risk preference there's a timing issue where they care about
• 36:09
  the return of their capital more than they care about the return on their capital.
• 36:14
  So they don't need the full upside as long as they know they're going to get it back
• 36:18
  if things go badly if they wrong if I wrong if you wrong and Bitcoin goes down over the next three years goes to zero even BitEdge is the product for them Because if Bitcoin doesn give you your money back plus
• 36:36
  a return, we're going to go get it from the real estate. So that brings up the class B owners. And
• 36:43
  this is very unique. Class B owners, they own commercial real estate. They have no debt on it.
• 36:50
  for their own personal portfolio preferences.
• 36:56
  They don't want to sell it.
• 36:58
  And they're sitting on all this equity in real estate
• 37:01
  that may be generating a yield.
• 37:03
  Maybe it's not.
• 37:04
  Not all real estate cash flows.
• 37:06
  There's actually a huge amount,
• 37:07
  land and even other assets that don't cash flow.
• 37:11
  And they are Bitcoin bullish.
• 37:14
  They have the opposite risk preference
• 37:16
  from the capital investors.
• 37:20
  They want to take on the risk in exchange for a share of the upside.
• 37:25
  So the payoff that they face is if Bitcoin goes down over the three-year lockup,
• 37:32
  you're going to have to make whole the class A investors and pay them back whatever was lost.
• 37:38
  However, if Bitcoin goes up, as we all expect it to, because we're buying in the bear market,
• 37:44
  you get 40% of the upside.
• 37:46
  And these real estate owners, they have no funds invested to buy the Bitcoin.
• 37:53
  So it's not a loan to real estate to then buy Bitcoin.
• 37:58
  It's receiving capital, securing it with real estate.
• 38:04
  And now what we start on, and that's all done on day one.
• 38:07
  It's a closed-ended fund.
• 38:09
  So we collect both assets on the day of closing,
• 38:13
  combined them and what we have in the fund is a $20 million Bitcoin position secured separately
• 38:19
  with $20 million of real estate equity. So it's a fund with a floor value and an upside.
• 38:29
  No, it's awesome, man. And tip of the cap to you, I was so excited to be introduced to you
• 38:34
  and learn about your product is one, as I mentioned on previous spots, I'm spending a lot more time in
• 38:40
  in Bitcoin investment product design, which is super exciting for me.
• 38:44
  I love thinking about this stuff.
• 38:45
  And you just nailed two really important aspects right off the bat.
• 38:52
  And so I think, one, combining hard assets.
• 38:57
  So you've got the real estate and the Bitcoin.
• 39:00
  It's actually three.
• 39:02
  Two, spot Bitcoin exposure that you don't get in a product like STRC or SATA or something like that.
• 39:08
  And then three, I think like the early products, Bitcoin investment products, to your point, should actually be engineered to manage volatility to the downside.
• 39:22
  Like everybody is like, cool, returns are great.
• 39:25
  Yeah, Bitcoin is going to rip sometime in the future, blah, blah, blah.
• 39:28
  But most, I think the capital sitting in the sidelines is scared for these moments we're in the bull market.
• 39:33
  Nobody wants to report back to their investment committee.
• 39:35
  It's like, or, you know, their LPs or, you know, the owner of their family office is like, yeah, boss, we're down 50%, but just trust me.
• 39:43
  You know, they don't like to hear that.
• 39:45
  And so I think, yeah, I'm so excited that you stumbled upon this, that you're bringing this to market.
• 39:52
  Because when you combine those three, I mean, I think that's just like the home run and how all future Bitcoin investment products, at least in the short term, should be designed.
• 40:02
  So I learned a lot of this from you and I'm tying pieces together.
• 40:08
  You developed it.
• 40:10
  Like, was it just native given your real estate background that you were kind of in tune to
• 40:15
  like some of the downside engineering and hard assets or how did you stumble upon putting
• 40:21
  all these three things together?
• 40:23
  Yeah, I think I gave the commercial real estate flavor to a couple different ideas.
• 40:31
  some of my own, some other people's. People may be familiar with residential real estate,
• 40:41
  more like revolving kind of product where you can come in and out. A large Wall Street firm has a
• 40:50
  gold-backed Bitcoin private fund offering that's super similar to this. And I actually learned
• 40:58
  about it when I was in the process of already developing this. And then I found their gold
• 41:02
  back strategy. I'm like, oh, wow, that's super similar. But my own perspective, and they're
• 41:10
  selling tens of millions of dollars of this fund. But from my perspective, how much worse
• 41:15
  of a combo product is gold and Bitcoin than commercial real estate and Bitcoin?
• 41:24
  Like their gold is so much more correlated.
• 41:27
  They're kind of serving the same purpose in this like macro thesis economy.
• 41:33
  I did some research.
• 41:34
  Real estate is not correlated to Bitcoin, slightly negatively correlated.
• 41:39
  The one time that they moved down together was 2022 when interest rates were spiking.
• 41:45
  So real estate values came down and that happened to be the last Bitcoin bear market.
• 41:50
  So they did move together that one time, but real estate was only down 10, 20% in most markets.
• 42:00
  So a product like this would survive essentially, even in the stress tested cases.
• 42:06
  and we need to build it to survive even significantly worse than historic stress tests.
• 42:18
  So that's how I thought about the engineering of it.
• 42:21
  Now I will say it's all about downside protection, how secure it is, return of capital.
• 42:29
  That's all for Class A.
• 42:30
  where does that like guarantee and nothing's guaranteed obviously disclaimer but this very
• 42:40
  provable way yeah i thought that might be a blanket disclosure at the start of the podcast
• 42:47
  as we just we do no we do we have one i think i remember that
• 42:51
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• 42:59
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• 43:02
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  financial planning, individual wealth management,
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• 43:10
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• 43:14
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• 43:16
  Visit our website at basilic.io
• 43:18
  to schedule free consultation.
• 43:22
  So yeah, where's this very demonstrable
• 43:27
  and credible security on your principle come from?
• 43:35
  It comes from the owners of commercial real estate
• 43:38
  who operate with no debt
• 43:40
  and they're willing to pledge
• 43:42
  the very bottom of their capital stack.
• 43:45
  The last part of their capital stack to get eliminated
• 43:48
  is this bottom chunk of equity.
• 43:51
  So they're putting the best at risk.
• 43:54
  So the real question is,
• 43:55
  why would a real estate owner do that?
• 43:57
  you're taking on all of the risk for someone else in exchange for 40% profit share on the upside.
• 44:06
  Why they would do it is probably the most interesting part of the product.
• 44:13
  And this is something that I've worked with a great legal team in formation to create,
• 44:18
  because even on Wall Street, at least among the folks I've met so far, which includes fund administrators,
• 44:26
  you know formation council bankers we created a way for them to pledge their
• 44:38
  real estate in exchange for a share of the upside of Bitcoin and there's no
• 44:44
  interest rate all they pay is a setup fee that's comparable or lower than like
• 44:51
  a refinance fee it's less than the origination for most refinances so you
• 44:56
  You have almost no impact on your current property.
• 45:00
  It's operations, it's cash flow.
• 45:02
  But you just put to work a chunk of equity that wasn't working before.
• 45:06
  And you put it to work in Bitcoin.
• 45:09
  And you can choose to receive the payout of the profit in Bitcoin.
• 45:14
  So something I've been thinking about a lot is real estate owners,
• 45:19
  especially if they're operators, they're active in the industry,
• 45:22
  they're looking for a competitive advantage.
• 45:24
  because it's not just easy money anymore.
• 45:27
  It's not just build multifamily, build storage units,
• 45:31
  they'll lease up, you turn around and sell it
• 45:33
  once it's stabilized and you're going to just be
• 45:35
  crushing it every year.
• 45:37
  People are bashing their head against the wall
• 45:40
  for like 50 basis points improvement
• 45:42
  in their yield from a property.
• 45:45
  Working so hard between energy, renovations,
• 45:49
  maintenance, training their management team,
• 45:52
  better marketing, and maybe you go up 100 basis points in yield over a year or two of that.
• 46:00
  Sounds like a lot of work.
• 46:02
  I tell them, where do you think Bitcoin is going to go from here?
• 46:07
  And most people are like oh yeah it going to go back at least to an all high Like okay interesting What if some of your property value could share in that upside of Bitcoin from here to the next all high
• 46:23
  And how the math works
• 46:24
  is if they pledge 50% of the property value
• 46:28
  and they get 40% of the profits,
• 46:33
  if Bitcoin were to double,
• 46:35
  that's 20% of their property value paid back to them in Bitcoin if they were to pledge 50%.
• 46:44
  So when they're working super hard for 6% or 7% yields and they can generate a 20% yield
• 46:52
  on their property value just by letting Bitcoin ride, that's an extremely large competitive
• 46:58
  advantage. And I think one of the main things that, as I look for partners, it's partners who
• 47:05
  understand that. Selecting the partners who understand this is a competitive advantage for me.
• 47:12
  And the only thing that has to work is Bitcoin to go up. Because, yeah, that was an extended answer,
• 47:23
  but thank you for following through it. No, that was great. Yeah. And especially the long time
• 47:30
  horizon of the 37 months. If you just look back in the past, I mean, if we were still at 64,000
• 47:39
  in three years, then that would be, I guess in that case, it means that the U.S. has balanced
• 47:46
  its budget and they're running a survey. My question, again, kind of in reflecting on the
• 47:56
  events the last week. Can you talk through the custody partner that you're using and just kind of
• 48:04
  put the potential investors that may be listening or their advisors that are listening to this
• 48:10
  podcast? Like what does that look like? How is the Bitcoin actually, you know, if they send
• 48:15
  Bitcoin or they send dollars that are converted into Bitcoin for the fund, how is that look on
• 48:20
  the back end. Yeah. So for custody, my fund works with Anchorage Digital and I've talked to several,
• 48:33
  what's that? Friends of the pod. Okay. Right on. Yeah. I know there's a lot of great
• 48:40
  Bitcoin centric companies. Anchorage does other stuff as well, but within the institutional fund
• 48:47
  space, Anchorage and BitGo are the two names that LPs expect. They do most of the large
• 48:55
  commercial and institutional stuff. Great team there. And what's critical is there's no single,
• 49:06
  like if someone compromises my phone or my technology, the fund doesn't lose its assets.
• 49:12
  If they compromise my CTO, the fund doesn't lose its assets.
• 49:17
  So I think distributing that with institutional and no single point of failure is what's critical to get it right and not be susceptible to even five-year-old software code that nobody knew was vulnerable, but now AI is showing is vulnerable.
• 49:38
  and honestly that's what kind of as a tangent where investors might be looking for different
• 49:49
  ways to get bitcoin exposure of different flavors or this applies especially to the more broad like
• 49:57
  crypto blockchain overall stuff i think it's pretty hard to diligence these opportunities
• 50:06
  if there's any software, there's code involved,
• 50:09
  because we don't know what AI is going to be capable of even six months from now.
• 50:14
  And what seems secure, maybe it's even had two rounds of audits
• 50:19
  from these credible companies.
• 50:22
  It might not be.
• 50:24
  Earlier this year, this might not have crossed your radar,
• 50:27
  but two DeFi protocols or things,
• 50:32
  One was a Dow and another was a protocol.
• 50:36
  Each was hacked for, if I remember, over $200 million each earlier this year.
• 50:43
  I mean that a lot of money from people going into crypto Crypto is not that big of a market compared to traditional finance assets So to lose million twice in just a couple of months that huge
• 51:01
  Yeah, that's crazy.
• 51:02
  I did not know that.
• 51:04
  One quick follow-up on that is you had mentioned the multi-institution.
• 51:10
  Can you kind of talk through how Anchorage does that in the background?
• 51:17
  Is that a part of the overall custody structure where they are holding some amount of the quorum of keys and then there's another qualified custodian that holds other keys?
• 51:29
  Or is it generally all with Anchorage right now?
• 51:33
  I think all with Anchorage.
• 51:35
  I'm sure they'll shout out if I got that wrong, as opposed to true multi-institution custody like OnRamp or someone where they're different.
• 51:49
  But what they do is they split the signing.
• 51:51
  So there are three authorized signers, need two of three.
• 51:56
  They also do video verification, voice verification.
• 51:59
  you know the things that at least for the next three years should still be reliable
• 52:06
  until we get back to the economy where it's like i have to see you and touch you
• 52:11
  before i know it's really you
• 52:13
  yeah that makes sense oh and as we uh wrap here daniel this is this has been awesome really
• 52:21
  appreciate you laying out how you know this product works and and the the technicalities
• 52:28
  behind all of it. But what's the reception been? What's the fundraising been like? I'm curious,
• 52:35
  from both the class A and the class B, have they been receptive to this idea? Any common
• 52:42
  FUD narratives you've been pushing back against? Good question. So is the reception? Yes. I'll say
• 52:52
  I'm going for a very narrow slice of either side. So of all the people that have money and want to
• 52:58
  buy Bitcoin. I'm sure you're in the same boat. For a majority, it's just go buy Bitcoin, be patient,
• 53:07
  buy it right, buy real Bitcoin, not paper Bitcoin, which applies to my fund as well,
• 53:12
  or buying real Bitcoin. But then within that, so that's the most common, you say, advice or like
• 53:21
  direction that people are going that I'm talking to. But then, like you said, there's some committees,
• 53:26
  There's some risk profiles.
• 53:29
  They just want to know there's downside protection.
• 53:35
  One pushback is, well, I can accomplish the same downside protection with options.
• 53:41
  So why would I give up 50% of the upside in exchange for this downside protected product?
• 53:48
  Because that's what I'm offering.
• 53:51
  And that's a great question.
• 53:53
  I think there's a couple reasons you might not choose to do it with options.
• 53:59
  One, is it cheaper to buy this done-for-you downside protection product, which costs you 50% of the upside?
• 54:09
  It doesn't cost you any money out of pocket, but 50% of the upside.
• 54:13
  Or is it better to buy Bitcoin and then manage your own options?
• 54:17
  I think the first filter is how competent are you at managing options for downside protection?
• 54:24
  How frequently do you want to roll?
• 54:26
  How are you getting quoted?
• 54:27
  How far out can you buy?
• 54:29
  Really one year, a few desks will do two-year options, but no one's doing three-year options.
• 54:35
  Whereas I'm like, from day one, that real estate is your collateral.
• 54:39
  If we lose money, you're going to go get that real estate or I'll go get it for you.
• 54:44
  So that's really a taste preference.
• 54:46
  And then the big question, is it more expensive or less expensive to do options?
• 54:52
  And of course, the answer is it depends.
• 54:55
  If Bitcoin stays in this range for a long time, your options are going to be very expensive
• 55:00
  to protect your floor at, say, $60,000.
• 55:03
  But if Bitcoin rips really soon, it'll be very cheap.
• 55:07
  So I think it's more about convenience, what you're capable of, what are your alternative
• 55:14
  capabilities.
• 55:19
  What else In the real estate world the biggest competition to using my tool the BitHedge tool for real estate owners is to just go borrow money against your real estate and buy Bitcoin
• 55:38
  Because then you get the whole upside instead of half. And you have to pay for the downside either way. So you're taking on similar risk. You're getting less upside.
• 55:48
  but critically you're making zero payments along the way.
• 55:54
  You can pledge a million or a $5 million portion of equity
• 55:59
  and it's earning Bitcoin proportional to that
• 56:02
  and you have no interest payments.
• 56:05
  And as expected, you'll never pay anything to the fund
• 56:09
  as long as Bitcoin pays you.
• 56:12
  So I think that's the choice facing real estate owners.
• 56:17
  Do you want to pay interest payments?
• 56:18
  and potentially have higher upside?
• 56:20
  Or do you want to keep your capital kind of in the operations
• 56:25
  and get a significant portion, but not the full upside of Bitcoin?
• 56:33
  I love it.
• 56:35
  This is very enlightening.
• 56:37
  I'm excited for advisors to hear about this
• 56:41
  and any of the family offices or high net worth folks
• 56:44
  that they're working with.
• 56:45
  this can be a really interesting tool in the toolkit to have their clients consider. So
• 56:51
  I appreciate you coming on, Daniel. Real quick before we go, can you just shout out if an advisor
• 56:59
  or someone who's interested either on the real estate side or on the capital side,
• 57:04
  if they want to reach out and talk to you and see about getting involved, where do they go for that?
• 57:10
  Yeah. I connect with people on LinkedIn, Daniel Holbrook. The company is called BitHedge, like B-I-T, hedge, one word. I have a mustache in my profile picture. Among many, many other Daniels in finance and Bitcoin, I'm that one.
• 57:32
  the other place i'd point people is the website bit hedge.fund and it breaks down the strategy a
• 57:42
  little bit and there's like a contact us box and that would eventually get to me through the team
• 57:49
  and literally i love conversations with the people who are interested so don't feel like
• 57:54
  uh it's annoying in fact it's my favorite thing is to talk to the people especially to determine
• 58:01
  is this a good strategy for you or not?
• 58:05
  Because if there's another option that's better,
• 58:08
  that's what we love to discover.
• 58:10
  But if this is the best strategy for you,
• 58:12
  the timing is now.
• 58:13
  So I'm really in process with those partners
• 58:17
  that I'm going to select for fund one
• 58:18
  and take full advantage of this bear market.
• 58:25
  Amazing.
• 58:26
  Well, I love to hear it.
• 58:27
  We'll be here rooting on as well.
• 58:30
  And I'm excited for you to be back out in Denver in October to talk about it more and update us on your progress.
• 58:37
  So thank you for your time today.
• 58:38
  This is awesome.
• 58:40
  Yeah, thank you both, too.
• 58:41
  Great to see you again.
• 58:47
  We appreciate you joining us.
• 58:49
  If you want help with the future of Bitcoin and financial services, hit subscribe, leave a review, sign up for a newsletter, and share this with someone in your network who's integrating Bitcoin into their practice.
• 58:58
  If you work in finance and want to understand how Bitcoin is changing wealth management, lending, custody, retirement planning, and capital formation, you need to be at the Bitcoin Financial Services Summit October 20th through 22nd in Denver at the space.
• 59:12
  We're bringing together some of the smartest operators in the industry for practical conversations focused on what's actually working today.
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  Register now at bffs.media.com.
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  The more professionals we reach, the stronger this ecosystem become and our clients are better served.
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  Stay sharp.
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  Stay sovereign.
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  Keep lean from the front.
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  Thank you.